Remarks by Angel Gurría, OECD Secretary-General

12 March 2012, Marseille, France

(As prepared for delivery)

Ladies and Gentlemen,

It is a great pleasure to join you for this session on “the Green Growth Challenge: No Nature, No Water, No growth”.

More than ever before, our environmental resources are under enormous pressure. In the 20th century, the world population grew 4 times, economic output 22 times and fossil fuel consumption 14 times. And over the same period, water demand rose twice as fast as population growth.

This calls for immediate and targeted policy action, and we at the OECD have been working to support policy-makers at this key juncture. Let me just start by outlining the scale of the challenge.

The Water Resources Challenge

Water is one of the world’s most precious resources. And today, cities, farmers, industries, energy suppliers, and ecosystems are increasingly competing for their daily water needs. As a result, the costs of inadequate water management are becoming higher and higher. And not just financially – but also in terms of lost opportunities, compromised health and environmental damage.

As the February US Intelligence Community Assessment on Global Water Security points out, from now through to 2040, water shortages and pollution are likely to harm the economic performance of important trading countries. Economic output will suffer if countries do not have sufficient clean water supplies to generate electrical power or to maintain and expand manufacturing and resource extraction.

Water problems will also hinder the ability of countries to produce food. During the next 10 years, the depletion of groundwater supplies in some agricultural areas – owing to poor management – will pose an enormous risk to national and global food markets.

These challenges call for a different growth strategy that can also expand economic opportunities. This is why we released the OECD Green Growth Strategy last year. It provides an actionable policy framework for governments to foster economic growth and development. But it also ensures that natural assets continue to provide the resources and environmental services on which our well-being relies.

Water plays a central role in our Green Growth Strategy because well-managed water systems can be an important driver for growth and it can generate huge benefits for our health and our economy. Some countries have already shown the way forward. For example, Australia has increased its GDP by around AUD 220 million in 2008-09 with ambitious reforms to establish a water trading system in the Murray-Darling basin and through reallocations of water used in agriculture – despite a severe drought.

However, badly managed water systems can significantly hinder growth and prevent opportunities for further development. Therefore, water policies and green growth policies must go together. So let me outline what we consider to be the key priorities for a robust policy framework for water and green growth.

Water and Green Growth: towards a policy framework

First, putting a price on water and water-related services is an effective way to signal both the scarcity of the resource and the right time for investment. Pricing fosters water efficiency and is instrumental in managing water demand. Pricing helps governments to allocate water across sectors and uses to where it adds most value. And pricing can also encourage water re-use and recycling. These are all essential ingredients for Green Growth. Through appropriate pricing, one-third of OECD countries have reduced total water use since 1990.

Second, we must eliminate bad policies from the past to provide additional funds to boost green growth. Such bad policies are for example subsidies, which encourage wasteful use of water. Indeed, decoupling farm subsidies from production is already changing irrigation practices and crop patterns in several areas in Europe. With decoupling, we can stop encouraging farmers in dry regions to grow crops with high water requirements. This concern is highlighted in our report on Water Quality in Agriculture which we are releasing here in Marseille.

Third, to facilitate the transition to greener growth, we must pay attention to social equity concerns and the distributional effects of water reforms. Experience in New Zealand confirms that, when appropriately managed, ceasing agricultural support can enhance revenues for farmers. Farmers benefitted from this reform because they shifted to crops and cattle which add more value per drop. Moreover, Chile has shown that targeted social support is more effective than low tariffs to combine investment in water and sanitation with affordability for the poor.

Fourth, green innovations for water must become much more widespread and shared across national borders. This can help us overcome path-dependency. Two areas stand out in this context: waste-water treatment equipment and techniques as well as the management of nutrients and agricultural run-off. Moreover, non-technological innovation such as new business models and city planning will also be crucial. An example is decoupling revenues for water utilities from the volume of water supplied or treated.

Fifth, we need water infrastructure investment. Especially in water scarce or flood prone regions, we must invest in water storage and distribution systems. You all know the 4 Rivers Project in Korea – building small multipurpose dams there secured 920 million cubic metres of flood control capacity.

Investment in water supply and sanitation infrastructure remains another key priority, particularly in urban slums where unsafe water and lack of sanitation generate huge health costs and lost opportunities to the economy. But we know that the benefit-cost ratio of investment in water supply and sanitation can be high. So, there is clearly a need to make these investments more attractive for investors.

Last but not least, an enormous challenge for Green Growth strategies will be to bring coherence into policies across governments and jurisdictions. This includes water and environment, energy and climate, agriculture and food, but also city planning and land use policies. All these policies are often inconsistent, but achieving greater policy coherence will be vital. Unravelling historical policy and institutional legacies and sharing information will be key steps in breaking down the barriers for more coherent policies.

Ladies and Gentlemen,

Let me just finish with an analogy from biology – without water, there is no growth. And so I say: without sound water policies, there can be no green growth policies.

I welcome the initiative by the World Water Council and Korea to develop a policy framework which will help governments design and implement water reforms in support of Green Growth. We at the OECD are doing similar work on this issue and we look forward to our continued collaboration.

We will present the work of the OECD on water in more detail at our side event tomorrow at 13h15. Then, we will launch our flagship report Meeting the Water Reform Challenge and also present the key messages from our Water Outlook to 2050. Do come and join us at this event. We look forward to seeing you there!

Thank you very much.

Environment